Will running the option put town at a disadvantage?

Wednesday, July 22, 2009

By Cary Shuman

By Seth Daniel

For the Transcript

A spirited meeting is expected this Tuesday night as the Town Council debates the implementation of two controversial local option taxes – one for hotels, motels and inns and another for the meal’s tax.

Along with the state budget, the Legislature passed a measure that allows cities and towns to adopt local option taxes. The hotel tax can be increased as much as 2 percent, while the meal’s tax can only be increased locally by 0.75 percent.

However, the state also passed an increase to the general sales tax, which will affect the meal’s tax. That increase will be 1.25 percent and will go into effect in August. If the local option is passed, it could mean an increase of 2 percent in the meal’s tax for Winthrop establishments. The current meal’s tax is 5 percent and could potentially go up to 7 percent, depending on the actions of the Town Council.

As for the hotel tax, according to the state Department of Revenue, Winthrop’s hotel excise tax is currently at 4 percent. The Town Council could increase it to as much as 6 percent.

The Legislature passed the local option taxes as a way of helping towns like Winthrop to bridge the gap in their budgets and avoid layoffs. However, with a very bad economy – especially in the restaurant and hospitality sectors of the economy – it has begun to be a situation where the survival of local government is being pitted against the survival of local business.

Local town administrators weren’t available for comment before deadlines, but the town has advertised the hearing for July 28 at 7 p.m.

Already, the Winthrop Chamber of Commerce has come out adamantly against both measures.

One of the biggest concerns is being at a competitive disadvantage with other surrounding towns. Already, Revere city councilors have sounded off against the meal’s tax and don’t appear interested in approving it. Lynn Mayor Edward “Chip” Clancy Jr. has said he won’t ask the Lynn City Council to approve the increase.

“This would also put Winthrop at a competitive disadvantage,” said Eric Gaynor, executive director of the Chamber. “If we adopt this and other cities and towns don’t, we’re not going to be on a level playing field. That is a big, big concern of the business community…It’s like the people that drive 15 minutes out of the way to save 2 cents a gallon on gas. It’s human nature.”

Additionally, Gaynor said that increasing taxes on two struggling industries would be detrimental.

“Right now, it is so hard to get people to spend money,” he said. “To make it even more expensive to go out to eat or stay in Winthrop – we don’t think that would be good for the economy. In a bad recession, increasing taxes is not the way to go with businesses.”

In many areas, the hotel excise tax has been viewed as more palatable than the meal’s tax. However, Gaynor said the Chamber doesn’t see it that way. While surrounding communities have hotels that are tied to Logan Airport travelers, Winthrop’s three hotels are more of a destination for visitors and tourists.

Gaynor said they have become an economic engine for other local businesses.

“They’re like economic engines in their own way,” said Gaynor. “They bring people into this town and when they come, they spend money in Winthrop. They eat, shop and take taxis here. To put an extra tax on our inns when they bring in visitors and help the economy – we don’t think that’s a good idea…Any Chamber will tell you visitors are good…It’s beneficial to all our businesses having these hotels here.”

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